Bertelsmann

Bertelsmann, Europe's largest media company, doesn't have to disclose its communications with lawyers in its legal fight with record companies over its ties to Los Angeles-based music downloading service Napster Inc., a court said. A federal appeals court in San Francisco ruled that companies including EMI Group, the third-largest record company, didn't prove a fraud that would override lawyer-client confidentiality.

Media giant Bertelsmann reported a first-quarter loss of about $450 million, citing a weak U.S. marketplace and continued costs from its purchase of the world's biggest independent record company. The closely held German conglomerate, which owns the Random House publishing unit and the Bertelsmann Music Group label, posted a profit of more than $2.8 billion a year earlier.

German media giant Bertelsmann said Thursday it will buy U.S. Internet music store CDNow Inc. for about $99 million in cash. Bertelsmann, whose holdings include No. 2 U.S. record company BMG Entertainment, will also assume $42 million of debt in the deal. This includes funding that Bertelsmann is extending to CDNow to pay off debts and to keep the business going until the sale closes later this year. Bertelsmann is under pressure to expand its Internet businesses as America Online Inc.

German media company Bertelsmann said Friday that it was selling its North American book club business, including Columbia House and the Book-of-the-Month Club, to a private investor for an undisclosed sum. Bertelsmann, which also owns the Random House book publishing business, said the sale of Direct Group North America to Najafi Cos. in Phoenix should close during this quarter. Both companies are privately held. The Direct Group operates book, music and DVD clubs in the U.S.

Germany-based media conglomerate Bertelsmann said it has hired Joel Klein, the former Justice Department attorney who led the government's antitrust case against Microsoft Corp., to run its U.S. corporate services unit. As chief executive of the Bertelsmann unit responsible for tax, audit and legal affairs, Klein is expected to advise the firm as it pursues a potential merger with EMI Group and attempts to transform Napster, the free file-swapping service, into a subscription-based venture.

Bertelsmann said Wednesday it will form a European joint venture with America Online Inc. and is buying a 5% stake in the fastest growing U.S.-based provider of on-line computer services. The news sparked a furious rally in America Online shares, which jumped $11.25 to close at $82.25, a rise of 16%, on the Nasdaq system.

A Bertelsmann unit sued Liquid Audio Inc., accusing the money-losing Internet music provider of planning to distribute $58 million in dividends illegally instead of saving the money for creditors. Liquid Audio said it would pay a $2.50-a-share dividend, according to a lawsuit filed in Delaware by BeMusic Inc. BeMusic says it licensed software in 1999 from Liquid Audio, which agreed to pay $20 million in potential damages and half of defense costs if BeMusic loses a patent-infringement lawsuit.

Gunter Thielen, the new chief executive of German media giant Bertelsmann, lost little time in underlining the difference with his go-getting predecessor, Thomas Middelhoff. In a letter to employees just three days after Middelhoff was deposed, Thielen stressed the core values of the group, which started life almost 170 years ago printing hymnals in the northwestern German town of Gutersloh.

It stands just a stone's throw from a sheep pasture in this provincial town in northern Germany: the corporate headquarters of Bertelsmann, the biggest international multimedia conglomerate that no one knows anything about. In America, entertainment powerhouses such as Walt Disney Co. and Time Warner Inc. are noisily battling it out for the top competitive positions in this multichannel age. Giant broadcasting concerns--Turner Broadcasting System Inc., CBS Inc., Capital Cities/ABC Inc.

Vivendi Universal, the world's No. 2 media company by market value, said Bertelsmann Chief Executive Thomas Middelhoff resigned from its board of directors. Middelhoff cited conflicts of interest between the two entertainment companies as the reason for his departure. "It was an uncomfortable situation, as they're competitors in music and publishing," said Eric Burkel, an analyst with Global Equities, who has a "buy" rating on Vivendi Universal shares.